On an earnings call last week, CEO Paul Otellini found himself reassuring analysts that Intel’s “leading-edge” fabs are still its “single greatest asset,” enough to justify $13 billion in 2013 capital spending to maintain this edge.

A big test of that will occur over the next two years, as Intel intends to finally lay claim to the world’s most advanced mobile processors. These will be manufactured with transistor features as tiny as 22 nanometers, which Intel plans to introduce this year, before it pivots relatively quickly to selling mobile chips made with a 14-nanometer process in 2014.

Intel has sold mobile chips for some time, but the first Intel-powered smartphones and tablets only shipped in 2012. More power-efficient ARM-based designs sold by companies like Qualcomm and fabricated in foundries like TMSC and Samsung have comprised the smartphone chip market so far.

Otellini is right that Intel will pull ahead with its 22-, 14-, and, eventually, 10-nanometer technology, and that this edge may be its best hope for convincing device makers to buy its newest mobile processors—along with new, more efficient chip designs.

“The problem for Intel is that they don’t get anywhere by being Intel. They are the new kid on the block now. Just being equal doesn’t do much; they have to be better,” says Linley Gwennap, principal analyst for the Linley Group.

Crucially, these chips will also be designed to help solve the biggest problem that delayed Intel from entering the mobile market—designed initially with plugged-in PCs in mind, its chips have sucked too much battery life from devices.

Intel has designed new chips that offer improvements. Today, Intel’s 32-nanometer “Atom” smartphone chip architecture, now found inside a total of seven devices sold in 20 countries, is already “equal or better than the best ARM designs,” Otellini claimed last week. Going forward, combined with a smaller architecture that packs more transistors onto a chip, Intel can make higher-performing chips that can also consume less power, Gwennap says.

Such advantages could appeal particularly to device makers looking to make smartphones that act more like tablets, or tablets that act more like powerful notebooks, says Len Jelinek, chief semiconductor manufacturing analyst at the firm IHS iSuppli. As Otellini noted last week, the lines between form factors are blurring.

Still, there will be large barriers that Intel’s advanced manufacturing technology cannot solve as it tries to sell to more device makers. “It doesn’t matter how good your transistors are, you still have to create products that are meeting market needs,” Gwennap says.

It will be a challenge, for example, for Intel to design the right combinations of features and specifications on its chips, integrating everything from Wi-Fi and cellular capability to graphics and GPS features. In the last few years, Intel has acquired a number of companies to help with this effort, but has not proven it can incorporate them smoothly.

Intel must also combat the perception that ARM is the default mobile chip designer. Device makers, working on rapid product cycles, could view it as risky to switch to Intel until its mobile technology is more proven, says Jelinek.

And finally, Intel faces risks as it plans how much expensive manufacturing capacity to build. Mobile chips are smaller, so it will be harder to keep the fabs busy even with a lot of orders.

These questions are all crucial for Intel’s business, because PC sales are slumping. Intel gave a nod to these seismic shifts yesterday by announcing a slow ramp down of its desktop motherboard business so it can focus on lightweight ultrabooks, tablets and phones.

The company is making some progress. Today, for example, some of the seven smartphone designs that come with Intel inside include models from ZTE and Lenovo, two of China’s top smartphone sellers. Its Clover Trail chips can now be found in 10 tablets, too.

Jelinek anticipates that Intel will be “part of the wireless revolution” moving forward. “It is the next generation of technology that Intel is really good at providing. It has just taken them a long time to get there.”

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